California News Tech (OTCBB: CNTE) Introduces:

E-motions: Vol. No. 1, Issue No. 1, July 26, 2005

Stocks That Ride High on a Tide of Anxiety

Emotions in Focus: Reactions to Anxiety
    This week as quarterly reports continue to come out, the media has begun to take notice of the disparity between the anticipated increase in stock prices based on companies’ earnings and the actual investor reaction, which has been much less optimistic. The Dow Jones, the S&P 500 and the Nasdaq were all down at the beginning of the week, largely due to the public’s anxiety regarding, not only rising energy prices, but also more generally, the threat of terrorism and the continuing war in Iraq. As rumors of a third planned attack in London circulated, and authorities here in the U.S. strengthened security on public transportation in response, investors’ fears heightened further last week, and have not yet subsided. Investors have been understandably shying away from stocks that are likely to suffer during times of political and economic uncertainty, but not all sectors have gone down with the market. In fact, investors often favor certain kinds of industries as a hedge in response to negative news. In particular, under threats of terrorism and unrest in the Middle East , companies involved with alternative energy sources, or security and defense, can make for popular buys.

2. The Big Movers and Why
    Specifically, at the end of last week, two companies stood out as dramatic winners despite the otherwise pessimistic market conditions. Both of these companies were Media Sentiment.com’s A Heads Up “Big Movers” of the week, indicating that they not only experienced significant movement on the market, but also sparked a strong emotional reaction in investors through the media. On Thursday, Flir Systems, Inc. (ticker: FLIR), which supplies optics for top of the line security systems, including government contracts, went up 21.98%. Then on Friday, BTU International (ticker: BTUI), which recently signed up to build a low-cost, energy-efficient ceramic solid fuel cell for Rolls-Royce, went up 41.57%. In the case of Flir Systems, Inc. investors saw that a company producing the surveillance technology that the governments in Great Britain, the U.S. and through out the rest of the world would be scrambling to install in their public transportation systems after the London bombings would be a sure financial bet. Likewise, investors looking at BTU International realized that, in the face of rising energy prices, and shaky Western relations with Middle East oil ties, a low-cost, energy efficient fuel alternative was an even better buy. Furthermore, with backing from a highly reputable car company, investors could be confident that BTU International’s fuel cells would actually go into production.

3. How to Make the Most of the News
    While the reasons behind the recent successes of Flir Systems, Inc. and BTU International may seem self-explanatory in hindsight, one factor both stocks share makes their story this week more remarkable. MediaSentiment.com analyzed the content of each stock’s earnings reports, and predicted through the strong positive sentiment regarding each company and its services, that they would go up. This analysis occurred seconds after earnings releases and before any trading occurred, and yet highlighted these stocks as the major winners they would prove to be through out the day. The success of all stocks is based on supply and demand, and this demand can often stem from the emotional needs of the public. When a company or product appeals to the public mood, either by addressing social fears, or by relating to the events and issues that are on everyone’s mind, it is positioned to also be a success with investors. Thus, an investor well-informed about the emotions of the public, especially regarding brands and industries as they relate to the news, can make powerful predictions about the price of a given stock.

4. Last Week in Media Sentiment
    In terms of the strength of this kind of analysis, the correlations between MediaSentiment.com’s thumbs up / thumbs down recommendations for Heads Up rated companies and subsequent stock price show a powerful relationship. The correlation between ratings for MediaSentiment.com selected stocks and their highs and lows the next day is 70%, explaining a majority of the variation in highs and lows. Also, the correlation between MediaSentiment.com selected stocks and their closing price the next day is 51%, explaining about half of the variation in closing prices. Finally, the correlation between MediaSentiment.com selected stocks and their percent increase in volume is 87%, explaining a vast majority of the variation in volume. Positive Correlations Between MediaSentiment.com Symbol Ratings and Next Day Stock Price/Volume Changes

5. Links You Can Use

Irrational anxiety on Wall Street

BTU International’s Deal with Rolls Royce

Pressure rises for more cameras in U.S.

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